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ABC Insiders

ANNABEL CRABB:
Next up is the Communications Minister Paul Fletcher. But first, here's the Treasurer Josh Frydenberg foreshadowing new controls on internet giants like Google and Facebook.

[Excerpt]

These digital platforms have grown rapidly and are posing challenges to authorities the world over. The world has never seen so much data collected and aggregated among two companies. So it's about now ensuring that our regulatory and legislative framework is fit for purpose. That is why this report is so ground breaking because it's used 40 statutory notices to lift the veil, so to speak, to get behind the fronts of these companies and understand how the algorithms are used, how the data is collected, how the data is monetised.

[End of excerpt]

ANNABEL CRABB:
Paul Fletcher, welcome to Insiders.

PAUL FLETCHER:
Good to be with you, Annabel.

ANNABEL CRABB:
We saw the Treasurer there, he was appearing with you discussing the ACCC's freshly released report into these online giants. What are your main concerns about the dominance that companies like Google and Facebook have attained over such a short time in Australia?

PAUL FLETCHER:
Well, this digital platforms report from the ACCC commissioned by then Treasurer Scott Morrison in December 2017 – it's been an 18-month inquiry – it's pointed out that Google has 19.2 million Australians who use it every month; Facebook, 17.3 million; YouTube, owned by Google, 17.6 million; Instagram, owned by Facebook, 11.2 million. They've got a massive presence in the economy. So, it looks firstly at the competition impact and on the impact, for example, on Australian media businesses but also the impact on consumers – the amount of information that Google and Facebook have about you and whether Australians fully understand that – the impact on media and journalism, consumer protection issues. There's a whole range of issue that are reflected in the 23 recommendations that the ACCC has made and the Government will now consider those recommendations. We're seeking feedback from stakeholders, from interested Australians, and we've said that we'll provide our final response to these 23 recommendations by the end of the year.

ANNABEL CRABB:
The online advertising market is just enormous now – $9 billion a year. One of the problems that companies have when they're trading, especially with Google, is these algorithms that control where you're ranked in searches are a secret. I mean, is this sort of like the KFC 11 herbs and spices? I mean, should it be allowed to remain a secret?

PAUL FLETCHER:
Well, as the report highlights, a large proportion of traffic coming to the websites of Australian businesses, like Seven West Media or Nine or indeed the ABC and SBS, comes via Google and Facebook. When there are changes to the practices of those services, it has a dramatic impact on how traffic flows and the question is-

ANNABEL CRABB:
[Interrupts] Right. So should regulators or governments have the capacity to pierce that veil, to actually make the process more transparent, to be fairer to the businesses that they transact with?

PAUL FLETCHER:
Well, what Rod Sims and the ACCC have recommended is that amongst other things, there should be a continuing digital markets branch of the ACCC, which can look at what is occurring in the relationship between the digital platforms and Australian media businesses. They've also recommended a code that the platforms would be required to provide and have approved by a regulator governing the commercial deals between Australian media businesses and the digital platforms. Now, that's a particular regulatory tool that they've recommended. We'll consider that. We'll be interested in the feedback of both the digital platforms and media businesses and we'll consider how to respond to that as part of that final response before the end of the year.

ANNABEL CRABB:
Okay. So, but regardless of the response, just on general principle, do you think that these companies should be forced to be more transparent about the way they do business?

PAUL FLETCHER:
Well, certainly, what the Treasurer and I have said is that Government accepts the ACCC's overriding conclusion that there's a need for reform. We accept the recommendation or the proposal that there needs to be a harmonisation of the media regulatory framework so that- at the moment, there are very different ways in which traditional media businesses, like free-to-air television providers, are regulated, for example in relation to Australian content, compared to the digital platforms. So, we've made that a broad statement in terms of the overall thrust of the ACCC's recommendations, and it's very clear that the report finds that Google and Facebook have substantial market power. They have a pervasive presence in our economy. Australians may well not understand how they are using the data. As Rod Sims has said, their business model is to grab your attention and to collect your data, and then to monetise that with advertisers and others, and it's important, for example, that when, as a consumer, you are using those platforms, that you understand how that information might be used.

ANNABEL CRABB:
Okay. The report also expressed particular concern about the viability of local and regional news and said that an effective business model for these outlets hasn't been found. Do you now accept that it’s the Government's responsibility to support those services, either through direct grants or via levies on these hugely profitable digital players?

PAUL FLETCHER:
Well, we already have a $60 million package – the Regional and Small Publishers Jobs and Innovation Package, which was announced as part of our 2017 media reforms. We’ll obviously consider these other recommendations, certainly, we'd be interested again in perspectives on those. What the report highlights is the impact that Google and Facebook and other digital platforms have had on traditional media in Australia and around the world and that presents policy challenges to governments around the world. There was a lot of interest globally in the ACCC's preliminary report and I expect there’ll be a lot of global interest in this report. Certainly, there are many more choices now available to Australians. Enormous amounts of information available to you over digital platforms, so there is choice and diversity. But the question is: what is the impact, for example, on local newspapers,
on regional newspapers? And what would be an appropriate policy response?

ANNABEL CRABB:
As a principle, do you think that these giants should be obliged to cross-subsidise the less viable elements of the legacy media?

PAUL FLETCHER:
Well, the report doesn't make specific recommendations about cross-subsidisation, for example, but what it does call for is a harmonised media regulatory framework. So today, the free-to-air networks have an obligation to show a certain amount of Australian content. They’ve got to pay to produce that or to acquire that. But streaming platforms like Netflix or YouTube don't have such obligations even though they're capturing a huge number of eyeballs in the Australian market, and in the case of Netflix, substantial revenue. And for example, there are different rules about advertising on free-to-air television…

ANNABEL CRABB:
Right.

PAUL FLETCHER:
…as compared to what YouTube or Netflix faces. And so, therefore, the call for harmonisation is something that, in principle, we've indicated we accept. Now, the ACCC makes the point – this is going to be a major exercise, it’ll need to be carried out in stages. When we respond at the end of the year, what effectively we'll be doing is laying out a regulatory road map in the area of media policy and in the other areas such as privacy that the report canvasses. Bearing in mind, that just in March this year, we introduced significant tightening up of the laws relating to the privacy of Australians and online platforms, tougher penalties, including up to 10 per cent of domestic turnover of a digital platform in relation to privacy breaches.

ANNABEL CRABB:
Just on Netflix, I mean, that company earns hundreds of millions of dollars from Australian subscribers. It has about five million subscribers in Australia but all of those subscription fees go straight to a company based in Amsterdam. So the company is paying negligible tax in Australia but it also has no requirement to provide Australian content and it chews up an awful amount bandwidth. Is there a way of mandating a surcharge on Netflix’s access to the NBN?

PAUL FLETCHER:
Well, certainly, NBN itself has recently released a discussion paper which has asked retail service providers questions about a whole range of possible pricing options. Now, that’s a matter for NBN board and management in terms of setting NBN prices. In relation to broader policy settings, the Treasurer has been pretty clear about our Government's approach in relation to tax on global businesses, in relation to their Australian activities. There is GST on Netflix and the question about Australian content obligations on businesses that are serving, supplying content to millions of Australian consumers is the kind of question that emerges in considering the recommendation for a harmonised media regulatory framework. But I think there’s a lot more work to do to consider that recommendation and to seek the views of stakeholders as we’ll do during the consultation period.

ANNABEL CRABB:
[Talks over] Sure. But let me put it more simply – would you like to see Netflix making a bigger contribution to the Australian economy?

PAUL FLETCHER:
Well, Netflix certainly, there is GST on the Netflix services.

ANNABEL CRABB:
[Talks over] Sure, you said that, but they're getting- they’re getting a pretty good deal, aren't they? They’re not paying very much tax. They're using a lot of bandwidth and they’re getting the NBN on the same terms as everybody else. Should that change?

PAUL FLETCHER:
I think, as part of considering what might be included in a harmonised media regulatory framework, clearly, one of the questions is obligations on free-to-air television networks and on subscription TV for Australian content: does it stack up for Netflix not to have such obligations? Those are questions that we'll consider. We'll be interested in the feedback of stakeholders.

ANNABEL CRABB:
But you don't think it’s a fair deal the way that it’s working at the moment?

PAUL FLETCHER:
Well, as this report analyses, there's a set of obligations on one set of businesses serving Australians and providing content, namely traditional free-to-air and pay TV operators. There is no such obligation on Netflix or indeed on Stan and others which are also providing content to Australians. And we're all watching a huge amount of television content delivered over the internet. Today, Australians, on average on the NBN, download 240 gigabytes of data a month. The equivalent number in 2010 across fixed line networks was around 11 gigabytes a month. That massive increase in data reflects the fact that we now have many more choices in terms of the content we can look at. We've got a network in terms of the NBN which facilitates people watching television over the Internet, but it raises significant policy questions, those are precisely the kinds of questions that this comprehensive ACCC report, over 600 pages, examines with its 23 recommendations and a…

ANNABEL CRABB:
[Talks over] Okay.

PAUL FLETCHER:
…significant program of work ahead of us to examine those and come up with our final response.

ANNABEL CRABB:
Okay. Minister, Rob Harris in the Sydney Morning Herald this week reported that before the election, you, as Social Services Minister, intervened personally to have a recommendation that Newstart be increased, pulled out at the final report of a bipartisan select committee. Is that correct?

PAUL FLETCHER:
Well, the recommendations in that report were agreed by the members of the committee. That's how it always works with a parliamentary committee. It's a report of the committee, of the members. There were Labor and Crossbench members…

ANNABEL CRABB:
[Talks over] Sure. Yeah.

PAUL FLETCHER:
…They signed off on those recommendations.

ANNABEL CRABB:
I know. But they signed off first on a draft report that did have a recommendation to increase Newstart, and after a direct personal intervention from you, that was removed in the final report.

PAUL FLETCHER:
A parliamentary report, including this one, is determined and finalised. Its content, its recommendations, are a matter for the committee members, as was the case here. They signed off on the report – Coalition, Labor and Crossbench members.

ANNABEL CRABB:
Did you have any contact with any member of the committee asking them to remove that recommendation from their final report?

PAUL FLETCHER:
Well, again, the parliamentary committee reports, including this one, are signed off on by committee members. That's what happened here and of course, we-

ANNABEL CRABB:
[Interrupts] It's a pretty easy question, though. Did you have any contact with anyone on the committee between the draft and final reports?

PAUL FLETCHER:
The point is that parliamentary committee reports are signed off on…

ANNABEL CRABB:
[Talks over] No, the point is it’s a fairly straightforward question.

PAUL FLETCHER:
…by the chair and committee members…

ANNABEL CRABB:
[Talks over] You said that. I understand. No one is-

PAUL FLETCHER:
…and that is what has happened here and that is as it should be.

ANNABEL CRABB:
[Talks over] No one is disputing that the final report was signed off by the committee. What I'm asking you is a simple question: did you have any contact with any member of that committee?

PAUL FLETCHER:
Look, I speak to colleagues all the time but I'm not going to go into the conversations I have with colleagues. The point I make is the standard practice is that a committee report is signed off on by committee members and that is exactly what happened here. The other point I make is that we are completely consistent in our position in relation to Newstart. Our focus when it comes to Newstart, as a government, is on getting people off of Newstart and into the workforce as quickly as possible.
We've created 1.3 million new jobs since we came to government. There are 230,000 people fewer, of working age, on welfare support in June 2018 compared to June 2014. So, we're having considerable success in getting people off of welfare roles into work. Of course, there's more to do, but Newstart is designed to assist people to make the transition into the workforce.

ANNABEL CRABB:
Sure. Look, it's totally clear to me from the way that you're answering questions that you did make a personal intervention because if you hadn't, you would have said so quite quickly. Is it appropriate for a minister to intervene at the very end of a bipartisan committee process?

PAUL FLETCHER:
Well, again Annabel, I'm not going to accept your characterisation there. What is absolutely clear-

ANNABEL CRABB:
[Interrupts] Well, you're welcome to deny it.

PAUL FLETCHER:
What is absolutely clear in relation to parliamentary committee reports is that they are reports of the parliamentary committee, and this committee resolved, in relation to the recommendations, and that's the report in the form it was tabled in March of this year.

ANNABEL CRABB:
We're right out of time, Minister. Thanks for joining Insiders.

PAUL FLETCHER:
Thanks, Annabel.

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